2016 (4) TMI 1184 - HC - Income Tax

Tax Appeal Denied: Depreciation Claim Rejected for Non-Owned Assets Under Section 260A Precedent

BHC upheld Revenue's position in tax assessment appeal under section 260A. Court rejected assessee's claim for depreciation on non-owned assets, citing ... Depreciation on assets not owned by the respondent - whether the Tribunal was right in its decision of treating toll roads as plant and machinery? - Held that:- Following the decision of this court in North Karnataka Expressway Ltd. [2014 (11) TMI 351 - BOMBAY HIGH COURT] wherein held that merely, because the road is laid out does not mean that the Assessee is the owner thereof. He has laid it out for the purpose of the union and for its ultimate vesting in the public we answer substantial questions of law in the negative, i.e., in favour of the appellant-Revenue and against the respondent-assessee. The Bombay High Court, in an appeal under section 260A of the Income-tax Act, 1961 concerning assessment year 2007-08, upheld the Revenue's position against the respondent-assessee. The key legal issues were whether the Tribunal erred in directing depreciation on assets not owned by the assessee contrary to section 32 of the Act, and whether toll roads could be treated as plant and machinery contrary to rule 5 of New Appendix I of the Income-tax Rules.Relying on the precedent set in North Karnataka Expressway Ltd. v. CIT [2015] 372 ITR 145 (Bom), the Court rejected the respondent's attempt to distinguish that decision based on a clause deeming ownership of the capital asset for depreciation purposes. The Court found that this clause had already been considered and decided in North Karnataka Expressway Ltd. (supra), particularly from paragraph 24 onwards.Accordingly, the Court answered both substantial questions of law negatively, ruling 'in favour of the appellant-Revenue and against the respondent-assessee,' and disposed of the appeal without costs.